Wednesday, March 16, 2005

Investing

Back in December, I took my first babysteps in the field of investing. A mere $200 in a Sharebuilder account. I think I want to do more. I can't do a whole lot, but I need to be making some of my money work harder for me. I have about $4500 sitting in my VirtualBank EMoneyMarket account, currently earning 2.57% APR. It's not bad, but it's not at the inflation rate either. The reason the money is there, is that it is my emergency fund. I need to to get a reliable return and still be easily accessible.

I'd like to do more with the Sharebuilder. Right now I send $25 a week toward to the eMM account, I'd like to send the same amount to Sharebuilder. It seems the safe thing is an Index Fund. The S&P 500, something along those lines. Would that nominal amount even do anything for me? Would I be better off taking that small amount and going for some stocks?

There are a lot of "beginners" websites out there for investing. They're still all over my head. You're supposed to "research" thoroughly any stock you invest in. How do you do this? Inquiring minds want to know simple answers. I haven't gone out and bought "Investing for complete Idiots" but I'm tempted.

What's the best resource for someone starting completely from scratch? No background. Just the facts, ma'am. Where do I turn to find a simple, easy guide for what I want to do, namely take $25 a week and put it somewhere where it generates more than the current inflation rate, so that I'm actually getting ahead a little bit?

Throw me a fricken' bone people. I'm the blogger...need the info...

6 comments:

Flexo said...

The first thing I can think of is if you plan on sending $25 every week to Sharebuilder, you'll definitely want something with no transaction fees or load fees. If Sharebuilder charges transaction fees, you'll probably want to minimize those by putting cash in less frequently.

Index funds are a great way to start out without having to do research on stocks and they're good for long term investing as well. If you go towards stocks rather than index funds with that amount, you'll be paying more in fees.

I'm no expert, certainly not a financial advisor, but those are my thoughts from one beginner to another.

Canadian Capitalist said...

Bruce, If I were starting out today, I would first concentrate on getting a suitable asset allocation. My allocation, for example, looks like this.

For small amounts, I would go with index mutual funds from Vanguard. For larger amounts, I'd go with exchange traded funds. Check out http://www.techuncovered.com. Its a great resource.

Good luck!

Canadian Capitalist

Anonymous said...

I assume that if you are going to invest in stock, either directly or through a fund, you are looking at not needing the money for al least 5 years or more. Anything shorter and you probably shouldn't be in equities.

Anyway, even at $4.00 per trade, Sharebuilder would be a pretty expensive way to invest small amounts. Assume you wait for your $25 per week deposit to accumulate to $100 and then make a purchase. At $4 that is a whopping 4% loss right at the start - that is an unbelievably high investment cost.

Stick with a low cost index fund for now. With automatic deposits, they will waive the minimum deposit required. The recommendation for Vanguard's S&P 500 is great. It is a very low cost fund.

Good luck!

Brian said...

Hopefully you will take my advice and not make the same mistakes everyone (including myself) does when they start out investing.

Since you are just starting out you need to read and learn first BEFORE you jump in. Seriously, taking a few weeks to do a little reading won't hurt you.

I'd recommend your visit the Vanguard Diehards forum. There are book recommendations there as well as many newbie posts which you can learn from.

Here is a good thread to read.

Back when I was in your situation the site helped to point me in the right direction.

The best beginner book I have read (and I have read many) is Eric Tyson's Personal Finance for Dummies. Pick up a used copy at Amazon or your local used book store.

Good luck!

Personal Finance for the New Age

Neville said...

Bruce,

The best way to invest your money is to take your $100 a month and PayPal it to Nev@mail.utexas.edu

Ok, it may not be the BEST way to make you any money, but it would make ME happy :-)

I suggest you find a few companies you really like and start investing in them regularly. I first read "Beating the Street" by Peter Lynch to learn about investing.

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